EP296 What is a Commercial Real Estate Waterfall and what are the Key Terms you need to Know to Structure your Deals, with Paul Moore
In order to understand how to structure an investment opportunity for your potential investors, you need to be clear on how the cash flow and profit will be distributed. This is called a Waterfall, and there always seems to be quite a bit of confusion as to what that actually means and how to convey it.
My friend Paul Moore recently wrote an in-depth article on Commercial Real Estate Waterfalls and I immediately contacted him to see if he’d share this valuable information with our listeners.
You may have heard Paul previously on this show talking about both apartment investing and self-storage. He is the Founder and Managing Partner of Wellings Capital and has completed over 85 real estate investments and exits.
Today Paul discusses the meaning of Preferred Return, Cash-On-Cash Return, Cumulative Return, and Internal Rate of Return v.s. Annualized Return. We discuss different deal structures and whether or not the sponsor/General Partner should receive a ‘Catch-up’. These are all terms you need to understand and carefully consider when structuring your deals, and they can make a big difference in the profit you and your investors receive.
Paul shares a lot of wisdom in this episode and you’ll definitely benefit from understanding these terms no matter what type of investor you happen to be. You can find out more about Paul and access his report on waterfalls through his website: https://www.wellingscapital.com
Today’s episode is brought to you by Green Property Management, managing everything from single family homes to apartment complexes in the West Michigan area.
And RCB & Associates, helping Michigan-based real estate investors and small business owners navigate the complex world of health insurance and medicare benefits.